1 What is the gain or loss recognized by C corporation on the distribution?

2 What are the tax consequences to R?

3 Suppose instead that the land had a fair market value of $100 instead of $150 (and its basis is still $130) at the time of the distribution. What is the gain or loss recognized by C corporation on the distribution? What are the tax consequences to R?

Ben and Jerry, want to form a corporation to conduct a consulting business. They will be the only owners. Unfortunately, neither of them has cash or property to contribute to the corporation other than the following:

Ben: One share of Nike stock. Tax basis $30 and fmv $100

Jerry: One share of Disney stock. Tax basis $10 and fmv $100

Ben and Jerry each have owned their respective stock in Nike and Disney for three years. Ben and Jerry don’t want to sell the stock and then contribute the cash proceeds to the corporation. Rather, they propose to contribute the stock to the corporation as a capital contribution in exchange for shares of stock in the newly formed corporation. What are the tax consequences if they pursue this approach.

- C corporation is a cash method, calendar year corporation. R, an individual, is C corporation’s sole shareholder. On December 31, C corporation has a $225 current earnings and profits balance and a $50 accumulated earnings and profits balance. During the year C corporation made equal quarterly cash distributions of $100 each to R. R has a stock basis of $70 in his C corporation stock. What are the tax consequences to R of each distribution?

C corporation distributes land to its only shareholder, individual R, in a nonliquidating distribution. The land has a tax basis of $130 to the corporation and its fmv is $150. The corporation has $500 in current earnings and profits and $200 in accumulated earnings and profits.